Up next in our Pinch Hitters series is a communication professor and the director of the University of Southern California’s debate program. Gordon Stables grew up in New Jersey and wrote that he still “remembers the joys of growing up watching Graig Nettles, Reggie Jackson and Thurman Munson” and although he enjoyed the more recent run of championships, Gordon still “wishes there was some way that Don Mattingly could have been part of those 1990s champions.”

For his post, Gordon took a look back at the payroll history of the Yankees compared to the rest of Major League Baseball. His title for this post: Keeping the $189 Million Payroll in Perspective.

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Yankees fans expect to see the team compete for a world championship each year. For many the idea of any fiscal restraint may seem like surrender. In the 40 years of Steinbrenner ownership, the Yankees were never bashful about acquiring high profile and big-ticket players. It seems easy to explain the seven Steinbrenner era championships as the result of seemingly unlimited spending.

The $189 million target has become a lightning rod for fans and media even though Yankees and MLB history suggest that the largest payrolls don’t often offer shortcuts to championships. As Yankees fans, putting the teams recent spending in context of their success may offer a little more perspective on past and future championships. We know the players and the plays, but the budgets are sometimes harder to contextualize.

The 2000s Yankees teams were not like other Yankees teams

Although the publicly available data on salaries makes a complete review impossible, enough information is available to compare spending across the past few decades. Many thanks to Baseball Chronology and Baseball Prospectus for their fantastic salary information. The linked document uses two indexes: Comparison of Yankees salary to the median team salary and Comparison of the Yankees team salary to the top 5 average salaries. These are simple measures of how much all teams paid and how the Yankees compared to the other big revenue teams.

When looking at these indexes it is apparent that, although the Yankees have long been a top salary team, something dramatic happened in 2002. Although the Yankees regularly had one of the largest team salaries, there were stable comparisons to other teams. The Yankees would have a median salary 150% of the other teams and they would be about 125% of the other top payroll teams.

The 90s dynasty (95-01)

Gene Michael’s scouting and development program combined with a mix of free agents to produce a high salary team, but one that ranged from 150-180% of the median team payroll. Compared to the other top 5 teams, the Yankees had a budget that ranged 108% and 121% of those teams’ salaries. In other words, the Yankees were the biggest spender in all but two years, but their budgets were still comparable to the other top salary teams. This era produced four World Championships and the remarkable 2001 series.

Spending to Retain Status (02-09)

After the 2001 season, a new model took hold where greater spending was needed to retain the core players and to recruit high salaried additions. The 2002 budget was 14% higher than the year before, and the Yankees crossed the threshold of averaging twice that of the median team salary (207%). Within two years the payroll would balloon to averaging over three times the median payroll and peaked at 321% in 2005.

Beginning of the new system (10 – present)

As the greater revenues enter baseball, the Yankees have started to return to more traditional levels of salary dominance. It is easy to say that the Yankees payroll keeps growing ($211 million in 2012), but the levels of the last few years represent a 225%-230% of median payroll and the Yankees are now holding steady at 125% of the top 5 teams’ salary. The move to $189 will likely produce a balance closer to the dynasty years where the Yankees averaged just about twice the median salary.

All of this matters because greater Yankees salary doesn’t make more good players available. Because the Yankees have created their own market, they have to bid against themselves for retaining their own players or attracting free agents.

Spending the most doesn’t guarantee championships

The team remains competitive each year, but being competitive is far from being a world champion. It is easy to blame GM Brian Cashman, but consider how the big spending frustrations extended across the top salaried teams. Since the 2001 season, 15 of the 24 teams that played in the World Series didn’t have a top six payroll. Seven of the 11 champions also were outside that top 6 payroll. Despite the popular perception, only one team — the 2009 Yankees — won a World Series with the top payroll.

Spending more for pitching doesn’t ensure better pitching

Yankees fans know all too well that part of that problem with top payrolls is that paying more for pitching doesn’t ensure great pitching. Building pitching through free agency is extremely difficult. Beyond the elite successes (Mussina and Sabathia) the failures are incredibly expensive and difficult to overcome. Between 2004 and 2006, the Yankees spent over $95 million dollars on below league average pitching. In those three years, they averaged 62 of their starts and one-third of their innings from these below-average pitchers. Even as the Yankees slowed the spending on outside bullpen arms, the 2010 team had to overcome 340 innings from A.J. Burnett and Javier Vazquez at an ERA of 5.28, with only cost the team $28 million.

Fans recall how hard it is to send these pitchers to bullpen, despite their performance. Of course big ticket pitchers are not the only to struggle, but by comparison, when Ivan Nova struggles today the team has the option to go to a David Phelps. The decision can be made (and reversed) based on performance, not because of their salary.

Focus on big ticket players has its limitations

Yankees fans who remember the 1980s recall teams that could hit, but aside from Ron Guidry, those teams struggled to provide elite pitching. All too often veteran players also see noticeable declines in their defensive abilities. The 2000s spending teams resembled these teams, and it was not an accident that the 2005 team has been cited as statistically one of the worst defensive teams in MLB history.

Looking for a veteran player both limits opportunities for young players and prevents the team from retaining those prospects. It may have once been hard to trace the connection between free agent signings and compensation picks, but as compensation rules evolve, these lines become blurred. Signing a successful marquee free agent like Mark Teixeira has unquestionably helped the Yankees, even as the Angels received the opportunity to draft both Mike Trout and Tyler Skaggs (now considered the Diamondbacks top prospect). The Yankees wouldn’t give back the seasons of Johnny Damon and Jason Giambi, but those signings produced the compensation picks for Daniel Bard and Joe Blanton, the type of cost-controlled pitchers teams always need.

Fans may dislike letting Rafael Soriano and Nick Swisher depart, but they were functionally being traded for Top 40 amateur players. These ‘trades’ are not visible at the time, but in recent years the team has benefited from this approach in the form of Phil Hughes, Joba Chamberlain and (now Diamondback) Ian Kennedy. All came as free agent compensation picks, and they represent an important way for all teams to acquire talent.

The lack of a budget allows agents to pit the organization against itself

How did Rafael Soriano become a Yankee? Why did they sign Gary Sheffield instead of Vladimir Guerrero? Why did they re-sign A-Rod after his poorly handled public opt-out? All of these questions relate to the unique dynamic of being an elite revenue team that could always spend more if it wanted.

At times the key player was Brian Cashman, George Steinbrenner, or Randy Levine. Successful agents like Scott Boras know that the Yankees brand and the Yankees interest in dominating the baseball market (off and on field revenues) means that there is another avenue to pursue if the GM says no. Who knows if Cashman alone would have negotiated with A-Rod in 2007 or perhaps stuck to the original eight-year offer, but the absence of any fiscal restraint allowed the A-Rod negotiations to have logic of their own.

The Yankees aren’t the only team with this challenge, but their revenues and tabloid media outlets make them a prime target. Boras has already begun to promote this strategy with Robinson Cano’s impending free agency. Cano is the Yankees most valuable position player today, but his next contract is likely to play a major role in how the Yankees are constructed for the next 8-10 years. Unlike the A-Rod negotiations, the acknowledgement of a budget will allow Cano’s performance and his contract to both be considered in how the team builds a championship club.

Conclusion – The Next Yankees Championship Club

From the level of despair, it would be easy to think that this was 10 years earlier, when the Yankees had won three straight championships. Instead, Yankees fans watch other teams win and have to consider that, before 2013, the Yankees were the only team in baseball to ever spend $176 million, let alone $189 million, on payroll. The Dodgers will join the Yankees next year, but there is no assurance that the Dodgers’ massive spending will even put them past the Giants or Nationals. The question of the payroll limit is important, but less so than the development and scouting plan that the team deploys. Yankees fans shouldn’t be embarrassed that their organization has the resources and chooses to spend them on the field. We shouldn’t also believe that spending creates champions. Resources are needed to field a competitive team, but MLB and Yankees history suggests the next Yankees champions will be the product of a core of homegrown players and selective free agent additions, not just the highest paid.